Statement and Summary: Affordable New York Housing Program

Joint Statement by Real Estate Board of New York Chairman Rob Speyer and President John Banks on Affordable New York Housing Program: 

“We applaud the agreement reached between Governor Cuomo and the State Legislature, under the leadership of State Senate Majority Leader Flanagan, Independent Democratic Conference Leader Klein and Assembly Speaker Heastie regarding the Affordable New York Housing Program.  It will result in the production of substantially more affordable rental housing that is critical to New York City's growth and future.”

________________________________________

STATE BUDGET FY 2018, UPDATE ON THE AFFORDABLE NEW YORK HOUSING PROGRAM

Last weekend, the State Legislature passed a budget bill for the fiscal year starting in April 2017.  There were two outcomes in the budget to note:

  • It restored tax exemption benefits for new residential construction, called the “Affordable New York Housing Program” (formerly 421a) and
  • The budget did not contain a provision that would have imposed a transfer tax on the conveyance of a minority interest of an entity that contains an interest in real property. 

REBNY worked tirelessly in Albany to ensure a favorable outcome on these two issues for our members and our industry.

________________________________________

AFFORDABLE NEW YORK HOUSING PROGRAM (FORMERLY 421A)

The program has been extended to June 15, 2022. 

The new program is retroactive to projects that commenced on or after January 1, 2016.

Projects that commenced prior to this date, have not received benefits and that comply with the provisions of the Affordable Housing New York Program may receive benefits pursuant to this program. Here are the affordability options a builder of rental housing may select:

Affordability Option A: 10 percent at no more than 40 percent of Area Median Income (AMI), 10 percent at no more than 60 percent of AMI, and five percent at no more than130 percent of AMI.  Years one through 25 would have a 100 percent exemption; only the “mini tax” (the assessed value of the site prior to construction not exempt from taxation) would be paid.  In years 26-35 there would be a 25 percent exemption, requiring that 75 percent of the taxes plus the mini tax would be paid.  Projects would be eligible to receive tax exempt bonds and tax credits.

Affordability Option B: 10 percent at no more than 70 percent AMI; 20 percent at no more than 130 percent AMI.  Years one through 25 would have a 100 percent exemption; only the “mini tax” would be paid.  In years 26-35, there would be a 30 percent exemption, requiring that 70 percent of the taxes plus the “mini tax” would be paid.  These projects would be eligible for substantial government assistance.

Affordability Option C: 30 percent at no more than 130 percent AMI; years one through 25 would have a 100 percent exemption; only the “mini tax” would be paid.  In years 26-35, there would be a 30 percent exemption, requiring that 70 percent of the taxes including the “mini tax” would be paid.  These projects would not be eligible for substantial government assistance.  Also, this option is not available in Manhattan south of 96th Street.

The program contains a homeownership option—Affordability Option D—which would provide 421a benefits for condominium or cooperative housing projects that contain no more than 35 units; are located outside Manhattan where the average assessed value for 100 percent of the units shall not exceed $65,000 upon the first assessment following the completion date and where each owner of any unit shall agree in writing to maintain the unit as their primary residence for no less than five years from the date of acquisition.  A homeownership project that meets the eligibility requirements receives a 20 year benefit. Years one through14 would have a 100 percent exemption, only the “mini tax” would be paid. For the final six years there is a 25 percent exemption that would require 75 percent of the taxes plus the “mini tax” to be paid.  However, no exemption shall be given for any portion of a unit’s assessed value that exceeds $65,000.

NEW PROVISIONS--AFFORDABLE NEW YORK HOUSING PROGRAM

The Affordable New York Housing Program addresses the wage provisions in the June 2015 legislation that led to the suspension of the 421a program.  Here are the new provisions in the program.

Enhanced Affordability Areas

The statute establishes three “enhanced affordability areas”: 

  1. The Manhattan enhanced affordability area is the area located entirely south of 96thStreet. 
  2. The Brooklyn enhanced affordability area is generally the area one mile in from the bulkhead in Community Boards 1 and 2.
  3. The Queens enhanced affordability area is generally the area one mile in from the bulkhead in Community Boards 1 and 2. 

(Street boundaries are contained in the law which can be found here.)

Enhanced Thirty-Five Year Benefit

New residential buildings with 300 or more rental units in an enhanced affordability area are eligible for the Affordable New York Housing Program and the “enhanced thirty-five year benefit” provided they meet the average hourly construction work wage requirement applicable to each area and the affordability requirement.   The enhanced thirty-five year benefit will provide a 100 percent exemption, except for the “mini tax” for 35 years. 

The enhanced thirty-five year benefit will include an “extended restriction period”.  The affordable units must remain affordable for forty years.

The average hourly wage is the aggregate amount of all wages and all employee benefits (such as vacation benefits, holiday pay, life insurance, apprenticeship training, and payroll taxes) paid to construction workers for construction work divided by the aggregate number of hours of construction. In the Manhattan enhanced affordability area the average hourly wage is $60 per hour; in the Brooklyn and Queens enhanced affordability areas the average hourly wage is $45 per hour.  (The minimum average hourly wage will be increased five percent three years from the effective date of this law.)

In addition, buildings in an enhanced affordability area must comply with an affordability option listed below.

Affordability Option E:  10 percent at no more than 40 percent of AMI, 10 percent at no more than 60 percent of AMI and 5 percent at no more than120 percent of AMI.  Eligible sites must be developed without substantial government assistance, except eligible sites may receive tax exempt bond proceeds and four percent tax credits.

Affordability Option F:  10 percent at no more than 70 percent AMI; 20 percent at no more than 130 percent AMI. 

Affordability Option G:  30 percent at no more than 130 percent AMI; Eligible sites must be developed without substantial government assistance. This option is only available in the Brooklyn and Queens enhanced affordability area.

OTHER KEY PROVISIONS

New residential buildings with 300 rental units or more outside of an enhanced affordability area can elect the enhanced thirty-five year benefit, provided they comply with the wage and additional affordability requirements.

For an applicant receiving an enhanced thirty-five year benefit, an independent monitor (a licensed accountant in good standing) must be contracted by the owner to monitor compliance with the wage requirements.

Within one year from the building’s completion, the independent monitor must submit to the fiscal officer (New York City Comptroller) a project-wide certified payroll report.   In the event the report is not submitted within the designated time period, the applicant shall be fined $1,000 per week, up to a maximum of $75,000.

Not later than 90 days after the completion of their construction work, each contractor and sub-contractor shall submit to the independent monitor a certified payroll report. In the event the report is not submitted within the designated time period, the independent monitor shall notify the fiscal officer.  The contractor or sub-contractor shall be fined $1,000 per week, up to a maximum of $75,000.

In the event that the project-wide certified payroll report shows that the applicable wage was not paid and if the average hourly wage paid was within fifteen percent of the wages required, then no later than 120 days from the submission of the project-wide certified payroll report, the applicant shall pay to the third party administrator an amount equal to the amount of the deficiency as set forth in the project-wide certified payroll report. The third party administrator shall distribute such payment to construction workers who performed construction work on the site in accordance with a plan approved by the fiscal officer. In the event the applicant fails to make such payment within the prescribed time, the applicant shall be subject to a fine of $1,000 per week, up to a maximum of $75,000. 

In the event that the project-wide certified payroll report shows that the applicable wage was more than fifteen percent below the wages required, then no later than 120 days the applicant shall pay to the third party administrator an amount equal to the amount of the deficiency as set forth in the project wide certified payroll report.   The third party administrator shall distribute such payment to construction workers who performed construction work on the site in accordance with a plan approved by the fiscal officer. In addition, the fiscal officer shall impose a penalty on the applicant in an amount equal to twenty-five percent of the deficiency, provided that the construction of the building was not the subject of a job action that resulted in work delay.  In the event the applicant fails to make such payment within the prescribed time, the applicant shall be subject to a fine of $1,000 per week, up to a maximum of $75,000. 

________________________________________

TRANSFER TAX ON MINORITY INTEREST

State and City transfer taxes are imposed on the conveyance of real property.  In addition, the tax is also imposed on the transfer or acquisition of a controlling interest in any entity with an interest in real property.  A controlling interest has been defined as an interest of fifty percent or more of the entity with an interest in real property. 

As part of the budget discussion, there was a proposal to impose a transfer tax on the conveyance of a minority interest (less than 50 percent) in an entity with an interest in real property. REBNY vigorously opposed this initiative which had serious compliance problems for minority investors in businesses large and small that own real estate.  Our ability to explain these problems to State officials convinced them not to pursue this proposal.

Please contact the Research Department (rebnyresearchdepartment@rebny.com or 212-616-5209) with any questions.